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Taming Global Capital

A network of market experts declares the global financial system a commons that should be governed accordingly.

| by David Bollier

If one thing has become clear since the financial collapse of 2008, it is that some privileged players were abusing the system for their private, competitive advantage. They were, in the language of the commons, free riders. They could milk the system for unfair profits at the expense of everyone else.

Too bad so few politicians have the courage to say such things plainly. To help make clear that we all have a stake in the financial system and in the ongoing debates about policy reform, a multinational network of financial players have organized themselves as The Committee on Transforming Finance. The group recently issued a formal Statement declaring that the financial system is a global commons that should be governed accordingly.

The Statement is a great idea for re-framing debate and making clear that all sorts of excluded stakeholders should have a seat at the table in redesigning the global financial system. Naming the financial system as a commons makes clear that commoners have the right and duty to prevent abusive private takings of their vital shared resource – the legal rules, international agreements, information/communications infrastructure and other institutions that allow the allocation of capital. The system should be designed and managed to serve all stakeholders, including the diverse elements of civil society and ecosystems, whose intrinsic value is often ignored by global capital markets.

The Committee on Transforming Finance was co-convened by Hazel Henderson of Ethical Markets Media; John Fullerton’s Capital Institute; Professor Leo Burke of the Mendoza School of Business at Notre Dame; and Steve Waddell of Networking Action. The drafting committee for the Statement includes investors, asset managers, business executives, philanthropists, academics and financial authors.

The CTF Statement declares that “the financial system is a global commons and calls for a new set of rules that would allow it to be governed in full conformance with this reality.” It continues:

“We as beneficiaries and active participants in capital markets affirm our responsibility to reform them from within, so that all those still-voiceless stakeholders who are now excluded and exploited can be heard and their communities appropriately served. If we are to avoid future systemic failures in the global financial system, we must re-think the underlying design flaws that precipitated the financial crises. We must move beyond Bretton Woods, where this financial commons was first defined within a set of global rules and institutions in 1945, as well as beyond recent attempts at reforms that have not addressed fundamental questions, including:

· What is the purpose of finance in human societies?
· What human values and principles should guide finance and its institutions?
· What are the limits of markets, money-based trading and transacting within the global commons?
· How can finance serve equitable, ecologically-sustainable governance of the global commons (climate, biodiversity, oceans, atmosphere, space) while reducing inequality, respecting human rights and acknowledging non-market-based, traditional societies?

Because we all benefit from healthy eco-systems, financially sound institutions and thriving human communities, rethinking the design assumptions of the regulatory and capital markets is an urgent global priority. Our call comes in the face of insufficient response by national governments to the financial crisis of 2008-2009, the demonstrated failure of traditional economics theory that markets are efficient in allocating capital, growing global interdependence, intensifying environmental crises, global social inequity and the technological interconnectedness of global financial markets. These 24-hour markets are dependent on satellites, internet and other technologies which were largely financed by taxpayers as public infrastructure investments.

Financial markets are founded on trust – now eroded by the irresponsible and unethical behavior of many players, including many of our leading financial institutions. Unbridled, greed-driven speculation, the improper use of public infrastructure technology for activities such as high-frequency trading, together with a misguided self-regulatory ideology reduced system resilience, damaged trust and thereby damaged the financial system commons. This led to unhealthy “financialization” now dominating vital businesses and activities in the world’s real economies. In order to re-build trust, the Transforming Finance initiative seeks to democratize finance and widen the debate on reform by including all stakeholders and the innovations of many experts and groups advocating deeper re-structuring and reforms.

The key operating mechanisms necessary to build trust in the Global Financial Commons include:
· Stabilizing the value of national currencies and establishing a reliable global currency regime.
· Channeling savings into productive and sustainable investments that build real wealth.
· Managing fail-safe, transparent payment and settlement systems.
· Appropriate, dependable, transparent tools for managing financial risks and assuring that issuers, insurers and counterparties are accountable.

To correctly reframe global finance as a commons, the finance system needs to incorporate the following commons principles:
· Stakeholder co-governance,
· Access for all participants without sudden, cyclical capital market disruptions,
· Acknowledgment of the intrinsic value and assignment of rights to the environment,
· Decision-making at the most local level possible (subsidiarity),
· A commitment to environmental sustainability and social justice globally.

It will be interesting to see what new sorts of conversations and action strategies begin as a result of the Statement. You can read the full statement here and a blog post on Steve Waddell’s Networking Action here..

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Posted September 22, 2010

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